Tag Archives: credit score

New Credit Score Model is Being Tested: Will Your Banking Affect Your Credit Score?

Right now, your banking habits — how often you deposit money, your account balance, overdrafts — do not affect your credit score. In fact, the three big credit bureaus can’t see and don’t know about such things.

But all that might change this summer.

Experian is working with a data company called Finicity to test a new credit scoring system they call Ultra Credit Scores. If they like the results, then they may roll it out nationally as early as this summer.

How Ultra Credit Score Works

If you give Experian permission, it will access your bank account to collect additional data for credit scoring purposes. What they want to see is no overdrafts, at least $400 as an account balance average for three months, and consistent deposits going into your account.

For example, if your employer automatically deposits your check every two weeks, that’s good. On the other hand, if you deposit your own checks and do so sporadically because you keep cash out for spending and don’t always get to the bank right away, then that is deemed as inconsistent and won’t gain you points.

If you have a nice savings account, that is good. If you have an occasional overdraft, that will hurt your score.

This is all new. Right now, the credit bureaus do not have access to your bank records.

Invasive or a Good Idea?

The idea behind Ultra Credit Scores (so they say) is that it will help young people starting out who don’t have much credit established to gain a good score. But hold on!

If you turned 18 yesterday, you can build a top tier score simply by following best practices without letting the credit bureaus spy on your personal banking habits. The same principle applies to older adults who have thin credit. Start today and build a good credit profile for yourself. It’s not hard!

I suppose if you have thin (not much) credit and you’re in a super hurry to buy a house right now, then the Ultra Credit Score system could help you. Frankly, I think there are a whole lot of Americans who prefer to keep their privacy and will deem it invasive.

Don’t Worry: They Can’t Spy If You Don’t Give Them Permission

Experian cannot access your banking information if you don’t give them permission, so don’t freak out: you are still in control.

Also, Experian is the only one of the three credit bureaus who is testing Ultra Credit Scores. If it ends up bringing them more revenue, then Equifax and TransUnion might follow suit; at this point, we don’t know.

Do You Want to Ensure Yourself of Having Top Tier Credit?

All the information that the professionals know about getting that 740 to 800 credit score is revealed in Build and Protect Your Credit Like the Pros. You can take a look here.

With a top tier score, you will save money on insurance premiums, interest rates, and favorably impress employers. $8.99 ($5.99 Kindle) is a tiny amount to spend to save hundreds and even thousands of dollars.

Thank you for reading my post. I hope you will share it on social media so others can learn about the new credit scoring system.

Three Big Credit Bureaus Grilled By Congress For 6 Hours

This week the big three reporting agencies TransUnion, Equifax and

Mark Begor/Equifax, James M Peck/TransUnion, Craig Boundy/Experian

Experian spent six hours giving testimony to Congress. They were asked questions regarding every aspect of their companies ranging from dispute resolution practices, cyber-security and the fact they have no other competition in their space.

With Maxine Waters, a long time consumer advocate at the helm of the financial services committee, you can bet the farm that this is not going to be a comfortable year for the bureaus.

Waters has already introduced a bill that would require yet another overhaul of the credit reporting system as well as amendments to the Fair Credit Reporting Act. Subscribe for updated information as it becomes available.

Many thanks to Chad Kusner, Credit Repair Resources LLC, for this information. CCCR offers a credit report analysis and consultation service for people who need credit advice without a full credit repair. More info here.

Build and Protect Your Credit Like the Pros guides you to achieving A+ credit in the shortest time possible.

Having a top tier credit score saves you money on insurance premiums, interest rates, and gains you respect in the community.

“Must have” for every American. Available on Amazon here.

Experian Wants to Spy into Your Bank Account

Experian has announced that it wants access to view people’s bank accounts. It wants to see who you’re making debit deposits to, who you’re paying, and when. It wants to look at items that do not report to the credit bureaus.

For instance, Experian wants to look at your cell phone payment, your utility bill, your Xfinity bill, and possibly your rent payment.

They’re calling this new program “Experian Boost.”

Their excuse for gaining this extra access into your personal life is that they claim it will improve credit scores for people who have thin credit, meaning not much credit.

But here’s the problem…

The Experian Boost program uses the FICO Score 8 model, which mortgage lenders consider outdated and don’t even use anymore. Mortgage companies are using FICO10. So this spy action won’t help you qualify to buy a home.

The good news…

is that you must give Experian permission in order for them to access your bank accounts. No permission from you = no spying by Experian.

This new “pioneer program” (as Experian likes to brag) is scheduled to come out in 2019.

Build and Protect Your Credit Like the Pros

Released today! 

Build your credit profile in the very best way so that you achieve top tier credit, gain respect from everyone you do business with, and save thousands of dollars on everything from auto insurance to a home loan.

Reading this book will take you from beginner status to expert. It starts with the basic of how to get your first credit card and proceeds to insider information not many people outside the industry know. When you finish, it will be like having a college degree in credit, if there were such a thing!

It’s not enough to have top credit. You must also protect your credit and finances, because there are more scams, frauds, and schemes now than ever before. Get the tips you need for protecting yourself from rip-off artists.

Makes a good gift for young adults, immigrants to the U.S., and anyone else who wants to improve their expertise on credit scoring.

Paperback available today for only $8.99. Kindle is $5.99.

Order here.

 

How Account Type Influences Your Credit Score

Some accounts influence your credit score more than others. When you think about it, it makes perfect sense.

Having a $300,000 mortgage is a greater responsibility than having a credit card.

Here is the order of importance/influence of type of account:

  1. Mortgage loans give you the most points. Always pay your home loan first and foremost. No exceptions. If you get in trouble and can’t pay all your bills, pay your mortgage on time, every time. Protect your home and your credit.
  2. Installment loans such as auto loans and student loans. An installment loan has a set payment and ending date. These count second for influence and importance.
  3. Revolving credit cards. This is ongoing credit. It is of least importance, but it is still important. Pay on time if you want a good credit score. If your score is 800 and you have one late payment on a credit card, your score can plummet by 100 points.
  4. Hard money loans are horrid and will negatively impact your credit score. Avoid hard money loans. These are finance company loans, cash advance loans, and payday loans that carry a high interest rate. They are rip-offs. They hurt your credit score, even if you pay on time, because only people who are “hard up” take a hard money loan.

When you understand credit, you are not at the mercy of the credit bureaus — you are in control. Create a good credit history and earn a top tier score. That way, you will save tens of thousands of dollars on everything from your mortgage to your insurance premiums. And, gain self-respect and the respect of the financial community.

Coming this fall, my new book, Build and Protect Your Credit Like the Pros. More information coming later, and not to be missed. Feel free to subscribe. I post about once/week.

Which is Worse: Having a Low Credit Score or Having a DWI?

Which will cost you more: Having a low credit score or getting charged with Driving While Drunk?

If you’re thinking like an insurance company, you’re going to say the low credit score is worse than the DWI. And you’re going to charge your drivers higher premiums for it.

Is that reasonable? I don’t know about you, but I’d rather be a passenger in a car with a driver who had a low score than with an intoxicated driver.

Look at this comparison of auto insurance costs for an average new insurance customer*:

Low Credit Score: $1,521 insurance premium

High Credit Score but with a DWI: $1,097 insurance premium

The person with a low credit score pays $424 more than the person with the DWI.

Keep in mind that you can have a low score simply by carrying too much credit — even if all your payments are made on time.

I have seen credit reports for physicians, dentists, and attorneys who had low scores due to carrying a lot of credit. These professionals had high incomes and could easily afford their credit. They made all payments as agreed. But, according to statistics, they have higher insurance premiums than the person driving drunk!

Does this make sense to you? I’d love to hear what you think.

In the meantime, it cannot be overstated how important it is to have a good credit score. A low score will cost you more in every financial arena, from buying a home to insurance premiums to credit card rates.

If your score is below 740, you will be wise to examine your report to determine how you can improve it and save yourself a bundle of money.

*Thanks to Chad Kusner, president of Credit Repair Resources, Inc. for the statistics.

 

 

 

Should You Close Extra Credit Cards?

Some of my book readers have been asking me if they should close out their extra credit cards. They may have a Visa, MasterCard, Sears, Target, Macys, Chevron, and Walmart card. They do not need all of those cards, because Visa and MasterCard will handle it all.

But my answer is NO and here’s why.

By closing the cards you already have open, you risk losing credit points.

You gain points for having a long history of credit. By closing old cards, you could lower your average length of credit.

You gain points for using a small portion of your available credit. This is calculated in two ways:

1) A low balance-to-limit ratio on an individual card.

2) A low balance-to-available credit ratio on all your cards.

If you close out all your store cards that you don’t need, you could hurt your score per #2 above. Your balance-to-available credit ratio could go up (depending on your remaining credit).

So, in general, if you have extra cards you don’t need, let them set open and unused. That way, you won’t risk losing points.

What If You Only Have Three Credit Cards?

If you only have two or three credit cards, that is enough and you do not need to seek out more. If you have two credit cards, plus one other trade line on your credit report, such as an auto loan or student loan, then that’s perfect. You have three accounts showing on your credit report, which is what you want for a conventional mortgage loan.

Best Practice

Best practice for a high credit score is to keep your balance-to-limit ratio low on all your credit cards. I suggest keeping it at 30% or less. Never go over 50%, because that will dock points. And never, ever max out your cards!

Thank you for reading this post. Feel free to pass it on to others via social media, because a lot of folks are using too much credit without realizing it is hurting their scores.

New Rules Will Stop Creditor Harassment and Limit Their Ability to Pursue Payment

Tired of being hounded by collectors? Fed up with being harassed for payment on an account that’s already been paid angry-collectoror is unverified? There is good news on the horizon!

The CFPB (Consumer Finance Protection Bureau) is proposing rule changes to the debt collection industry as follows:

  • Debt collectors will be required to disclose debt details so the consumer can easily verify accuracy right up front. Currently, consumers receive a bill demanding payment without ever proving whether or not the collector has the right to receive payment, whether or not the amount owed is correct, and other vital information. This will provide transparency and, hopefully, increase accuracy and fairness.
  • Debt collectors will be prohibited from pursuing a debt while it is in dispute. Fantastic!
  • Debt collectors will be limited in their communication with the consumer. The intent is to stop undue harassment.

In the meantime, know your rights and demand to be treated fairly and accurately. If you don’t want to be contacted by telephone, tell the collector to contact you by mail only. Current law states they must comply.

You also have the right to negotiate a settlement. And so you know, a settlement (as opposed to paying in full) will in no way harm your credit score or jeopardize your ability to get a home loan. Even if you have to pay taxes on the amount “forgiven,” you still come out financially ahead by taking a settlement.

However, if the collection is old, paying it off now will likely lower your credit score, so better to let it age off your report (or handle it like the pros do).

What I mean by that is, if you negotiate a settlement the way the professional credit repair specialists do, you can also have the negative account removed from your credit report–a very smart strategy!

Thank you for reading my post, and if you know anyone who is struggling with collections, please pass on this good and vital information to them.

Are Credit Inquiries Hurting Your Credit Score?

A credit inquiry is when a creditor (such as Visa, a bank, a landlord) pulls your credit report. Lately, people have been asking me how much this hurts their credit score and why. Here are the facts.

Too Many Hard Inquiries Hurt Your Score

A hard inquiry is when you apply for credit. If you applied for three credit cards during the holidays in order to save on your purchase, your credit score has been hit. Why? Because the credit bureaus do not know how you are going to use this new credit, whether or not you will max out your cards, or if you will pay on time. Also, when a person suddenly applies for a lot of new credit, it is a concern as to whether or not they will be able to afford the new, upcoming bills. Therefore, your score is temporarily lowered for six months until you have established your record with these new cards.

The Exception: When Hard Inquiries Will Not Hurt Your Score

On the contrary, you can apply for a mortgage or car loan with three companies in a short time span (less than 45 days) without it hurting your score. Why? Because the credit bureaus do not think you are getting ready to buy three new houses or cars. They assume you are shopping for the best deal.

That said, if you have six or more mortgage inquiries, it is going to raise a red flag to the underwriter approving your loan. Why? Because, as I explained in Mortgage Rip-Offs and Money Savers, shopping three lenders is sufficient. If you apply for a mortgage with many lenders, it looks like everyone is turning you down. That makes other lenders ask why no one wants to lend to you. You will then need to write a letter of explanation for your loan file.

Soft Inquiries Do Not Affect Your Credit Score

A soft credit inquiry is any of the following:

  • You request your own credit report.
  • An employer pulls your credit report.
  • Your current credit card company looks at your credit report to check how you are managing your credit. (Yes, they have the legal right to do this.)
  • Creditors troll your credit report to see if you are a good candidate to send a solicitation to. (To stop this annoying practice, go to http://www.optoutprescreen.com and get off creditors’ mailing lists.)

Don’t concern yourself with soft credit inquiries. They do not hurt your score in any way.

Unauthorized Hard Credit Inquiries

It is illegal for any creditor or lender to pull your credit report without your knowledge and consent. As a licensed, ethical loan officer, I ask every person who wants to get pre-approved for financing to give me their permission to order their credit report before I do so. And then, I make a record of this permission, whether it was by email, in writing on a form, or verbally, with the date. Other ethical loan officers do the same.

If a mortgage lender, bank, credit union, credit card company, or other loan company pulled a hard inquiry on your credit report without your permission, you have the legal right to have that inquiry removed from your report so that it does not harm your score.

First, contact the creditor to make sure you are correct about the hard inquiry. Then if they cannot provide you with your consent verification, ask them to send you and the credit bureaus a signed letter on company letterhead that requests the inquiry to be removed.

How Much Do Inquiries Lower Your Score?

The credit bureaus claim that an inquiry impacts your score only by about five points. However, in real life, it’s a different story.

One credit repair specialist tells me he has seen credit scores lowered by 15 points after several hard inquiries (such as multiple credit card inquiries). Another credit repair specialist said he saw a client’s credit score increase by 24 points after unauthorized hard inquiries were removed.

The higher your credit score, the more inquiries impact your score, because there are not other factors such as late payments and collections docking your score.

If you have a low credit score due to negative credit, then inquiries are the least of your worries. Work on establishing on-time payments and lowering your credit card balances to below 30% of the limit first, because those are your priorities.

For more information about how credit attorneys and certified credit repair specialists legally delete bad credit and restore your good name, please see here.

Thank you for reading my blog. I do my best to inform people of the facts about achieving “A” credit, because the American finance system is dependent on credit. Unless you are wealthy and will pay cash for everything — including a home — having a good credit score is essential.

Available for Kindle and paperback

 

 

 

%d bloggers like this: